Imagine being one of the first companies to tap into a multibillion-dollar industry. Moreover, the company also has the perfect platform to market its product. Do you want to own a piece of the company? If the answer is yes, you should take a serious look at Facebook Inc (NASDAQ:FB) stock.
So, what is this multibillion-dollar market FB stock about to explode on?
FB Stock: Stepping into a New $80-Billion Market
It’s the virtual reality (VR) industry, one of the hottest fields in tech today.
If you were at this year’s Consumer Electronics Show (CES) in Las Vegas, you are likely well aware of the enthusiasm surrounding VR technology. At CES 2016, you couldn’t walk more than 100 feet without seeing someone with a VR headset.
How big can the industry be? Well, according to Goldman Sachs, the virtual and augmented reality market could become an $80.0-billion industry by 2025. (Source: “Virtual Reality Could Become an $80 Billion Industry: Goldman,” CNBC, January 14, 2016.)
Goldman Sachs issued a research note in January. The investment bank predicts that in less than 10 years, the VR/AR industry could pull in $45.0 billion in hardware revenue and $35.0 billion in software revenue.
That would be a huge leap from where the level at which the VR industry is today. In 2015, consumers only spent $660 million on VR gaming hardware, accessories, and software. That number is expected to jump to $5.1 billion this year. (Source: “Virtual Reality Video Game Industry go Generate $5.1 Billion in 2016,” Fortune, January 5, 2016.)
Reaching that kind of scale implies that the VR industry will no longer be operating in a niche. In fact, it’s going to have mass-market appeal, just like notebooks and gaming consoles. Goldman estimates that the current hardware market for notebooks is at $111 billion and the video game console market is at $14.0 billion.
So we know that VR is going to be huge. However, competition is also getting intense. Big names like Alphabet Inc (NASDAQ:GOOG), Microsoft Corporation (NASDAQ: MSFT), and Samsung are all launching products in the virtual reality space. How can Facebook be successful?
Well, when you have a great product, a smart strategy, and a marketing campaign that no one can match, you are about to get an upper hand in the game.
Facebook’s $2.0-billion acquisition of Oculus is about to bear fruit. At this year’s CES, Facebook announced that the “Oculus Rift” VR headset is available for pre-order with a starting price of $599.00.
One of the challenges in the VR industry today is that to fully enjoy the VR gaming experience, consumers also need to get a computer that is “VR ready.” Those computers are often expensive and might discourage consumers from entering the VR world.
On that front, Facebook has a great strategy to address the issue.
The company is going to offer discounted Oculus-PC bundles. Some of the high-powered gaming computers from Dell, Dell-owned Alienware, and Asus are offered at a steep discount. Facebook will start taking pre-orders of discounted Oculus-PC bundles starting February 16. (Source: “Pre-orders for Oculus Ready PCs and Rift Bundles Start February 16,” Oculus blog, February 9, 2016.)
Since VR headsets are still quite new to the public, companies are trying to get the word out. So marketing is going to be crucial.
Speaking of marketing, Facebook might be in the best shape among all its competitors. Facebook’s social media platform has nearly 1.6 billion monthly active users. Just imagine putting up some cool 360-degree video of an “Oculus Rift” experience in everyone’s Facebook newsfeed. It would very likely go viral.
The “Oculus Rift” might already be the most well-known VR/AR product. In “Google Trends,” search interest of “Oculus Rift” is substantially higher compared to “HoloLens” or “HTC Vive.”
The Bottom Line on FB Stock
Let’s not forget that user growth in Facebook’s main social media app has been good enough in terms of keeping investors happy. Despite having 1.59 million monthly active users (MAUs), growth in the company’s userbase hasn’t really shown signs of slowdown. In the most recent quarter, Facebook’s MAUs increased 14% year-over-year. Mobile MAUs surged 21% year-over-year. (Source: “Facebook Reports Fourth Quarter and Full Year 2015 Results,” Facebook Inc, January 27, 2016.)
However, user growth in social media companies will eventually level off. Fortunately, Facebook has made strategic acquisitions like Oculus. As consumers start to embrace the VR world, the “Oculus Rift” could become a major growth engine one day—that’s reassuring for FB stock investors.